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American Airlines Merger: A Done Deal?

The merger of American Airlines and US Airways is a done deal, claims most of the trade press; it’s just a matter of time and working around a few ego barriers. Certainly, most of the “stakeholders” seem to want it, including US Airways, the main airline workers’ unions, Wall Street, and creditors. In fact, the only significant stakeholders who aren’t on the bandwagon are the federal-government agencies that would have to approve a merger, the current American management team, and the consumers who will face the consequences.

Why the suspense? Even though US Airways is the smaller of the two lines, everyone expects that the US Airways management team will mostly run the combined operation. And the self-proclaimed industry “insiders” say the remaining barrier is the bruised egos in American’s executive office. That’s certainly credible: Over the years, I’ve seen lots of important corporate decisions based on where the CEO’s wife wants to live or other equally trivial requirements.

But the larger question is what will happen to consumers if the merger goes ahead, since now that possibility is likelier than ever. All in all, my take is that the merger would do more harm than good.

  • Despite industry blather about the “increased scope” of a merged line, the main effect would be lessened overall competition. Certainly, a merged line could take you more places than either line could, separately. But the merged line isn’t likely to be able to take many of you places you can’t already reach on at least one of the legacy lines.
  • Even though we haven’t suffered a big airline strike in recent years, a work stoppage at the combined line would be far worse than a stoppage at either of the two separate lines.
  • US Airways’ current policies and practices are generally anti-consumer. The line is not at all innovative and it follows a strategy of gouging travelers to/from its major hubs. If the US Airways team does, in fact, control the merged outfit, you’ll suffer.

Beyond those overall unfavorable effects, you won’t see much of an impact, good or bad, immediately after the merger.

  • The combined line will retain the “American” name but be governed mainly by the US Airways management team.
  • Even though maintaining major hubs as close together as New York, Philadelphia, and Washington seems to make little sense, the merged line couldn’t consolidate them: None of those airports can handle much more traffic. And American’s Chicago and Dallas-Ft. Worth hubs and US Airways’ Charlotte and Phoenix hubs look like they’ll remain as is for some time.
  • The combined line would almost surely merge frequent-flyer programs, combining your mileage credit and retaining your elite status in either. It’s likely, however, that, using the merger as an excuse, the combined line will move the program in the direction Delta has already taken of basing elite status on a combination of the miles you fly and the money you spend.
  • The combined line will probably retain American’s membership in the Oneworld Alliance, along with the various partner-line benefits of that alliance. The downside to that is that British Airways, the most important partner, gouges frequent-flyer award trips with stiff fuel surcharges.
  • The combined line would probably begin divorce proceedings from Star Alliance and code-sharing with United. If you prefer to remain with Star Alliance, you might get some time to use your accumulated miles and possibly the opportunity to transfer miles into United’s program or that of some other Star Alliance member.
  • You will certainly retain both lines’ lounge-club memberships, but sooner or later you’ll lose Star Alliance reciprocity.
  • American’s credit cards are Citibank/MasterCards and US Airways cards are Barclaycard/MasterCards. The combined line could go either way exclusively, but it’s also possible that both card breeds will remain active for the foreseeable future.

That, then, seems to be the consumer effect. Minor changes now, bigger changes later, less competition, and generally anti-consumer fare and product policies. All in all, Wall Street gains, you lose. Surely you aren’t surprised.

Ed Perkins on Travel is copyright (c) 2012 Tribune Media Services, Inc.

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